News / Economy

    Egypt to Pay $1.5B in Arrears to Foreign Oil Firms

    People shop at Al-Ataba, a popular market in downtown Cairo, Nov. 11, 2013.
    People shop at Al-Ataba, a popular market in downtown Cairo, Nov. 11, 2013.
    Reuters
    Egypt promised on Wednesday to pay $1.5 billion of the $6 billion it says it owes oil firms, hoping the announcement will revive confidence in an economy battered by nearly three years of political upheaval.
     
    Egyptian officials speaking at an investment conference also sought to ease mounting concerns over everything from legal uncertainty to the black market for foreign currency.
     
    “There is approval to pay $1.5 billion,” Prime Minister Hazem el-Beblawi told the gathering, designed to lure investment from Gulf Arab states and businessmen. He said the arrears had discouraged investment in the critical energy sector.
     
    The oil-producing countries rallied behind Egypt after the army ousted President Mohamed Morsi of the Muslim Brotherhood in July, pledging billions of dollar in financial support.
     
    Political uncertainty since a popular uprising ousted autocrat Hosni Mubarak in 2011 has frightened away tourists and investors, cutting tax revenues and foreign currency inflows.
     
    That has increased pressure on the government to get oil firms investing again in extraction and exploration and attract both Arab and Western investors.
     
    Egypt has repeatedly promised to repay arrears to the oil companies following Morsi's removal, which was welcomed by Gulf states fiercely opposed to the Muslim Brotherhood.
     
    Finance Minister Ahmed Galal, addressing the same conference, said the central bank would supply the dollars needed to pay the firms.
     
    Financial disclosures by firms including BP, BG Group, Edison SpA and TransGlobe Energy show Egypt owed them more than $5.2 billion at the end of 2012.
     
    In the week after the army takeover, Saudi Arabia, Kuwait, and the United Arab Emirates pledged a combined $12 billion in grants, interest-free loans and oil products.
     
    Now Egypt is hoping Gulf businessmen at the Cairo conference will also pump cash into the country, a U.S. ally which has a peace treaty with Israel and controls the Suez Canal.
     
    Investment Minister Osama Saleh told Reuters Egypt hoped to attract $4 billion-$5 billion in direct foreign investment in the year to the end of June 2014.
     
    Egyptian government officials speaking at the conference said the country was on track to implementing a political roadmap that will lead to free elections and bring stability.
     
    But authorities have not managed to bring calm to the streets, where Morsi supporters stage regular protests against what they call a military coup that has brought widespread human rights abuses.
     
    The government says the Brotherhood is a terrorist group and a threat to national security.
     
    Political support from Gulf states has helped Egypt withstand criticism from Western allies who have questioned the country's democratic credentials since the army takeover.
     
    “How many fish?”
     
    Central Bank Governor Hisham Ramez said he expected more Gulf aid, but had no figure in mind. “Actually, we're not only counting on aid. We're counting on investments to come in.”
     
    Asked if he anticipated more aid from Saudi Arabia, the biggest Gulf economy, finance minister Galal told Reuters: “I cannot tell beforehand. You go fishing, how many fish are you going to catch?”
     
    Egypt badly needs private capital. Foreign direct investment fell to $3 billion in the 2012/13 financial year, which ended in June, compared with more than $10 billion a few years ago.
     
    The United Arab Emirates appears especially enthusiastic for its companies to launch or resume projects in Egypt.
     
    An informed source close to major Abu Dhabi investment companies told Reuters nearly $5 billion had been committed in loans and investments over the last four months and there was still scope for further investment in Egypt.
     
    Kirill Dmitriev, CEO of the Russian Direct Investment Fund, a $10 billion Kremlin initiative, said he was encouraged by the UAE's presence at the conference.
     
    “We believe Egypt is becoming an attractive investment destination,” he told Reuters.
     
    UAE Minister of State Sultan Al Jaber said sectors under discussion include agriculture, oil, gas and renewable energy.
     
    “We can't today define the size of investments. This we consider the beginning of a new page,” he said.
     
    “The most important thing we'd like to see happen is the topic of the laws needed to assure investors and protect their capital ...”
     
    The government is preparing a law to reinforce the legal standing of past contracts with the state, Mohamed Abazeid, an adviser to Egypt's investment minister, told the conference.
     
    The business environment in Egypt has been clouded by court cases that have challenged past contracts concluded by the state. These have included rulings ordering the renationalising of public sector businesses sold off in the Mubarak era.
     
    Qatar, which supported the Muslim Brotherhood, has been reluctant to invest in Egypt since Morsi's overthrow.
     
    Although Gulf Arab support is vital, Egypt is under pressure to come up with a long-term plan to revive the economy.
     
    The army-installed government launched a 29.6 billion Egyptian pound ($4.3 billion) stimulus package this year after Gulf countries pledged aid.
     
    The economy grew a meager 2.2 percent in the year to June 30, far too slow to make an impact on youth unemployment estimated at over 20 percent. Beblawi said the government aimed for economic growth of 3.5 percent in the current fiscal year.
     
    In a boost to the government officials trying to sell Egypt to Gulf Arab investors, Egyptian tycoon Naguib Sawiris, whose family controls the Orascom corporate empire, said he would invest $1 billion in the country in the first quarter of 2014.
     
    He told Reuters the investment would focus on construction, real estate, agriculture and microfinance.
     
    But it will take more than one heavy hitter to fix Egypt's finances.
     
    The Egyptian pound is being propped up by central bank dollar sales, introduced a year ago to help counter a run on the currency as the plunge in foreign investment and tourism caused a sharp fall in foreign reserves.
     
    Reserves, which stood at $36 billion before Mubarak fell, have been under pressure ever since. They totalled $18.59 billion at the end of October and Ramez told the conference they had dipped slightly last month. The November figure is due soon.
     
    Ramez said the black market for the Egyptian pound  would “not last long”, as two market sources said the currency had weakened against the dollar because of importer demand.

    You May Like

    US Leaders Who Served in Vietnam War Look Back and Ahead

    In New York Times opinion piece, Secretary of State John Kerry, Senator John McCain and former Senator Bob Kerrey say as US strengthens relations with Vietnam, it is important to remember lessons learned from war

    Trans-Adriatic Pipeline to Boost European Energy Security

    $4.5 billion-pipeline will become operational in 2020 and will deliver gas from Azerbaijan’s Shah Deniz II field to southern Italy

    Video California Celebration Showcases Local Wines, Balloons

    Annual festival showcases the region's harvested agriculture, fine wines and offers opportunities to experience the gentle breeze in a hot air balloon flight

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Vietnamese-American Youth Optimistic About Obama's Visit to Vietnami
    X
    Elizabeth Lee
    May 22, 2016 6:04 AM
    U.S. President Barack Obama's visit to Vietnam later this month comes at a time when Vietnam is seeking stronger ties with the United States. Many Vietnamese Americans, especially the younger generation, are optimistic Obama’s trip will help further reconciliation between the two former foes. Elizabeth Lee has more from the community called "Little Saigon" located south of Los Angeles.
    Video

    Video Vietnamese-American Youth Optimistic About Obama's Visit to Vietnam

    U.S. President Barack Obama's visit to Vietnam later this month comes at a time when Vietnam is seeking stronger ties with the United States. Many Vietnamese Americans, especially the younger generation, are optimistic Obama’s trip will help further reconciliation between the two former foes. Elizabeth Lee has more from the community called "Little Saigon" located south of Los Angeles.
    Video

    Video First-generation, Afghan-American Student Sets Sights on Basketball Glory

    Their parents are immigrants to the United States. They are kids who live between two worlds -- their parents' homeland and the U.S. For many of them, they feel most "American" at school. It can be tricky balancing both worlds. In this report, produced by Beth Mendelson, Arash Arabasadi tells us about one Afghan-American student who seems to be coping -- one shot at a time.
    Video

    Video Newest US Citizens, Writing the Next Great Chapter

    While universities across the United States honor their newest graduates this Friday, many immigrants in downtown Manhattan are celebrating, too. One hundred of them, representing 31 countries across four continents, graduated as U.S. citizens, joining the ranks of 680,000 others every year in New York and cities around the country.
    Video

    Video Vietnam Sees Strong Economic Growth Despite Incomplete Reforms

    Vietnam has transformed its communist economy to become one of the world's fastest-growing nations. While the reforms are incomplete, multinational corporations see a profitable future in Vietnam and have made major investments -- as VOA's Jim Randle reports.
    Video

    Video Qatar Denies World Cup Corruption

    The head of Qatar’s organizing committee for the 2022 World Cup insists his country's bid to host the soccer tournament was completely clean, despite the corruption scandals that have rocked the sport’s governing body, FIFA. Hassan Al-Thawadi also said new laws would offer protection to migrants working on World Cup construction projects. VOA's Henry Ridgwell reports.
    Video

    Video Infrastructure Funding Puts Cambodia on Front Line of International Politics

    When leaders of the world’s seven most developed economies meet in Japan next week, demands for infrastructure investment world wide will be high on the agenda. Japanese Prime Minister Shinzo Abe’s push for “quality infrastructure investment” throughout Asia has been widely viewed as a counter to the rise of Chinese investment flooding into region.
    Video

    Video Democrats Fear Party Unity a Casualty in Clinton-Sanders Battle

    Democratic presidential front-runner Hillary Clinton claimed a narrow victory in Tuesday's Kentucky primary even as rival Bernie Sanders won in Oregon. Tensions between the two campaigns are rising, prompting fears that the party will have a difficult time unifying to face the presumptive Republican nominee, Donald Trump. VOA national correspondent Jim Malone has more from Washington.
    Video

    Video Portrait of a Transgender Marriage: Husband and Wife Navigate New Roles

    As controversy continues in North Carolina over the use of public bathrooms by transgender individuals, personal struggles with gender identity that were once secret are now coming to light. VOA’s Tina Trinh explored the ramifications for one couple as part of trans.formation, a series of stories on transgender issues.
    Video

    Video Amerikan Hero Flips Stereotype of Middle Eastern Character

    An Iranian American comedian is hoping to connect with American audiences through a film that inverts some of Hollywood's stereotypes about Middle Eastern characters. Sama Dizayee reports.
    Video

    Video Budding Young Inventors Tackle City's Problems with 3-D Printing

    Every city has problems, and local officials and politicians are often frustrated by their inability to solve them. But surprising solutions can come from unexpected places. Students in Baltimore. Maryland, took up the challenge to solve problems they identified in their city, and came up with projects and products to make a difference. VOA's June Soh has more on a digital fabrication competition primarily focused on 3-D design and printing. Carol Pearson narrates.

    Special Report

    Adrift The Invisible African Diaspora

    World Currencies

    EUR
    USD
    0.8954
    JPY
    USD
    109.74
    GBP
    USD
    0.6851
    CAD
    USD
    1.3148
    INR
    USD
    67.673

    Rates may not be current.